Sir Philip Green's retail empire – which spans Topshop, Dorothy Perkins, BHS and Miss Selfridge – blamed the weather on Thursday as it reported a drop in sales in what he said were "very tough times".

Since the beginning of September, sales in the group's 3,000 stores have fallen by 3.7% on last year's levels as a result of the "unseasonable mild and wet weather".

That chimed with official data from the Office for National Statistics on Thursdaywhich showed that Britain's consumer-led recovery appeared to stall in October when retail sales fell 0.7%, ending a strong run of shopping data.

Green described trading conditions as challenging after the holding group for the Arcadia fashion companies and BHS reported a 0.5% rise in profits before exceptional items to £168m. The exceptional items were largely a £346m profit on last year's sale of a 25% stake in Topshop and Topman to the US private equity firm Leonard Green & Partners, which also owns the J Crew fashion label.

"Trading conditions remain challenging, therefore exciting and engaging our customer across multichannels is at the top of our agenda," Green said. It was reported that he is mulling a move into food sales inside his stores, echoing the success of Marks & Spencer's move into groceries.

In the year to end-August like-for-like sales were down 2.7% while the economic conditions had forced the group to make £33m of provisions for "certain onerous leases" on its stores.

Bidders are said to be circling the BHS chain - bought for £200m in 1999 with suitors such as South Africa's third richest man Christoffel Wiese as well as private equity companies linked to a possible buy-out. Green told reporters he was not in negotiations about a sale but did not rule out sell-offs of parts of his business empire.

Last year's sale of a quarter of Topshop and Topman has allowed the group to end its financial year to 31 August with £75m of cash rather than the £309m of debt the previous year. Green said he had been collaborating with the new investor and now has four fully owned Topshop/Topman stores in the US, with more planned.

The Daily Telegraph reported that Arcadiacould begin to move into food sales. Plans for food stores had been drawn up and a decision would me made at the end of the year about whether to launch into the groceries sector.

Green said he wanted to continue to expand overseas with 161 new stores planned over the year ahead. Last month, he said that the model Kate Moss could help launch Topshop in China after opening in Hong Kong in the summer. Moss is backing a new collection for the retailer for the first time in three years.

Green has previously said he is conducing a capital investment review and is now in the process of selecting a group of stores from all brands to upgrade and refurbish in the next six months.

With the crucial Christmas trading period approaching, analysts were attempting to interpret the data from the ONS showing the fall in October retail sales in October could be owing to shoppers holding back Christmas spending. A boost is also expected in November as the deadline nears for Christmas deliveries by online providers.

"Retailers are now firmly focused on delivering a bumper Christmas, which is expected to be 'very appy' as festive shoppers are predicted to spend more than ever using their mobile devices," Richard Lowe, head of retail at Barclays, said.